1 ETG Gothenburg 2010 : French tax incentives for R&D and IP

2 People Double tax treaty Impatriate or Expatriate tax regime France R & D Center Transfer/GrantingInvestments R&D tax credit Young innovative companies Accelerated depreciation Long term capital gain 16% Registration fees

3 1. If R&DCo IS LOCATED IN FRANCE

4 1.1 Are there any grants or incentives available for R&D expenditure ?  R&D Tax crédit Section 244 c B of the General Tax Code : “research & development tax credit ”. In order to reduce the cost of operations research and development to enhance competitiveness. This R&D tax credit is offset on the corporate income tax payable by the company under the year in which the research expenditures have been incurred.

5 1.1 Are there any grants or incentives available for R&D expenditure ?  Accelerated depreciation Higher depreciation rate on equipment useful in the context of R&D.  Young Innovative Companies (R&D are significant in the newly created company) 100% exemption from corporation tax or income tax on profits earned in the first three profitable years and 50% for the two following;

6 1.1 Are there any grants or incentives available for R&D expenditure ?  Immediate deduction of R&D expenses  The choice between immediate deduction or accelerate depreciation of the goods necessary for R&D

7 1.2 What tax relief will be given for the expediture ? The research tax credit is a tax credit of 30% of the expenditures on research and development up to 100 million euros and 5% beyond this amount. Companies which benefit for the first time of the R&D tax credit can have a tax credit at a rate of 50% the first year and 40% the second year. The R&D tax credit is offset on the tax result of the year. The surplus is used for the payment of tax over the three following years. The unused portion is refundable at the end of three years. The tax credit is for 2009 and 2010 immediately refundable.

8 1.3 Are any personal tax concessions available for staff assigned to your country to work for R&DCo  European actions for researchers Monthly living allowance, career exploratory allowance, mobility or travel allowance paid under an UE program are exempt from income tax under the Item 1 of Article 81 of the CGI (Inst. April 5, 2007, 5 F-14-7 No 1-5).  Impatriates (not especially for R&D staff) Employees carrying on business temporarily in France benefit of temporary exemption from income tax on two conditions: - - Not being French tax resident during the five calendar years preceding their impatriation in France; - -becoming French tax resident after impatriation.

9 2. IF IP Co IS LOCATED IN FRANCE

What tax reliefs will be given for the purchase costs of IP and what rate of tax will the company incur on royalty income For royalties and gains on sale of IP or patents or patentable inventions (new invention, involve an inventive step and can have industrial applications) the french taxation is: The long term capital gain with a rate of 16%. Moreover, all expenses can be deducted of the amount of royalties.

What tax reliefs will be given for the purchase costs of IP and what rate of tax will the company incur on royalty income ? Are excluded from the long-term, the simple know-how, software, trademarks, designs and models. In those cases revenues from the lease of such items are included in the global taxation (33,33%). If royalties are paid between connected companies, France allows companies to give up applying reduced rate of taxation of 16%, so they have to pay 33,33 % of taxation but they can deduct the full fees paid (Inst 4. C-2-4 No. 21).

Approximately how many of your country’s double tax treaties provide for the reduction of foreign withholding taxes on royalty There is about 100 tax treaties signed by France and which concerns royalties

13 3. What is the tax treatment on the transfer of the existing IP by the local company to IP Co?  If the transfer of IP cannot be assimilated to a transfer of goodwill, it is assimilated to the transfer of patent. The registration fees amounting to 125 € (Art. 731 of the French tax code)  If the transfer of IP can be assimilated to a transfer of goodwil, the taxation (registration fees) is 3% (under €) and 5% (above) of the value of the IP.

14 3. What is the tax treatment on the transfer of the existing IP or R&D by the local company to IP Co?  If a patent is exploited its transfer can be assimilated to a transfer of goodwill. The taxation (registration fees) is 3% (under €) and 5% (above) of the value  If the patent is not exploited, its selling or transfer entail the paiement of the registration fees amounting to 125 €

15 5. Is there a “clawback” of the grants and incentives in 2.1 above as a result of the transfer? No

16 Thank you